First-time home owners now have access to relatively “unbeatable” mortgage financing rates, thanks to the recently launched National Bank of Belize.

Prime Minister Dean Barrow, speaking at the bank’s opening on Monday, lauded his administration’s latest initiative, saying: “Our lending rates will be unbeatable, because our bottom line is people and not profit. That is why our introductory offer to the Belizean people is an unbelievably low 5.5 percent.”

The National Bank has started its operations with an initial $20 million in capital, all of which the Government of Belize has sourced from the Petrocaribe Fund.

The bank’s chairman, Senator Joy Grant, was clear in explaining that those funds will initially be used to “provide mortgage financing for construction to first time owners.”

She also pointed out that 50 percent of the bank’s initial $20 million in financing will be earmarked for loans to public servants, including teachers. “The remainder,” she added, “is for the general public.”

To compete with commercial banks

Since its initial establishment in April this year, Barrow has clearly stated that the National Bank’s purpose is to also compete with the commercial banks, which he said continue to offer unacceptably high lending rates to Belizeans.

“I have long complained that in an international environment of all time low lending rates, the inability of our commercial banks to seriously bring down the cost of money to consumers is unacceptable.

“The spread [between] bank deposit rates and bank lending rates keeps winding in favor of the banks. In this regard, this government refuses a minute more to be the dog that only barks,” Barrow said.

Therefore, an essential function of the National Bank is to push the commercial banks to offer more competitive rates to the Belizean people.

Since late 2010, the Central Bank of Belize has lowered the “floor” for deposit rates to 2.5 percent, with the hope to encourage financial institutions to proportionately reduce lending rates.

That expected reduction never came, and most financial institutions maintained relatively high lending rates that, according to the Central Bank, kept the average spread at about 7.10 percent, while mortgage rates around the world, including the United States, averaged nearly half that amount.

On Wednesday, USA Today reported that the “interest rate on 30-year fixed mortgages fell to 4.73 percent, from a 2013 high of 4.80 percent.”

With such competitive rates, Barrow said he expects that the “over the top” demand for cheaper mortgage financing will soon deplete the bank’s initial capital. Therefore, he explained that he plans to return to the House of Representatives, before Christmas, with a motion to authorize more capital for the bank.

Professionalism

Barrow also addressed looming concerns as to the degree of transparency and accountability to expected, saying that the “utmost professionalism and the highest standards will be required to see the enterprise through.”

He underscored the fact that the National Bank will exercise prudent lending practices that would be based on “proper evaluation and satisfactory collateral.”

Using the past debacle of Development Finance Corporation as an object lesson, Barrow said: “The National Bank cannot be a grab tub or the political pork barrel which, for example, the previous administration turned the DFC into.”

To preclude such an occurrence, Barrow said that the bank’s directorship has a “ready-made whistleblower” in the form of the president of the National Trade Union Congress of Belize, as well as a top-notch team of professionals that make up the bank’s board of directors.

Nevertheless, with all those directorship-level controls in place, he stated that the bank’s customers must do their part:

“When you borrow, you have to repay.” He explained that keeping the default rate low is pivotal to the bank’s success and ability to expand its services beyond just mortgage lending.

“If we run into trouble with delinquency even at this first stage, we will never move to level two.”

Barrow explained that the goal is to turn the current mortgage-lending-only national bank into a “full service, deposit-taking, credit-card offering institution.”

Management

The bank will be managed by a board of directors comprised of Chairman Senator Joy Grant; Vice Chairman Marion A. Palacio, the deputy Financial Secretary; Managing Director Jose Marin, the former president of Provident Bank in Belize; John Mencias; NTUCB president, Dylan Reneau; and Hector Sabido.

The Bank, which is located at the corner of the Hummingbird Highway and Forest Drive, opened its doors for business on Monday afternoon, and is operating under the motto “Of the People, For the People.”